Economy in the U.K. grew slower in the fourth quarter, hampered by high inflation and heavy snowfall, according to the latest report by the U.K. Statistical Department.

GDP growth in the fourth quarter shrunk by 0.5 percent in the fourth quarter, after rising 0.7 percent  in the third quarter, the report said.

Economists were expecting GDP growth of 0.4 percent.

The economy grew by 1.7 percent in the quarter, compared with the same period a year ago.

Output in the production industries however rose by 0.9 percent, even as the construction sector and service industries saw a decline in output.

The slowdown in growth was mainly due to business services and finance, construction, hotels and restaurants, the report said.

Conditions in the mining and quarrying segment output continued to worsen as they fell 2.5 percent, more than the 1.7 percent in the previous quarter. Manufacturing output, however, continued to improve with 1.4 percent growth.

Hotels and restaurants suddenly turned negative, as fears about higher inflation and lower job security began plaguing the economy, along with heavy snowfall that kept people out of the shops last year. Output in the sector, along with distribution fell by 0.5 percent, compared to the increase of 0.8 percent in the previous quarter.

The Bank of England has continued to maintain its key interest rates at a minimum, trying hard to contain inflation. However, higher VAT taxes and unemployment has left consumer confidence shaky. Many people expect inflation to soar higher in 2011.